ALSO: ABC's Bob Woodruff (hat tip: Patrick Gavin) ... White House speechwriter Jon LOVETT turned 2-7 aboard Air Force One. Robert Gibbs led him to the conference room up front. The President and a cake were waiting, and the boss led a rendition of “Happy Birthday.” … Jeffrey HIDAY of RAND ... Jamie SMITH of Senator Rockefeller's office, celebrating in Oregon with her nieces, Sage (2) and Elsa (6 months), climbing Mount Hood and swimming in a lake.

Story Continued Below

Good Tuesday morning. N.Y. Post cover, with a pic of the president — First edition: “SELLOUT!” Later editions: “DR. O NO! Liberals howl as Bam wobbles on health plan.”

CBS's Mark Knoller spotted an OBAMA RHYME OF THE DAY, in his address to the VFW, talking about a new generation of presidential helicopters that he says is too expensive and he doesn't need, even though it could cook him a meal during a war: "If the United States of America is under attack, / The last thing on my mind will be whipping up a snack."

PRESIDENT OBAMA and FORMER PRESIDENT CLINTON will eulogize WALTER CRONKITE during a memorial service at Lincoln Center at 10:30 a.m. on Sept. 9. Also speaking at the service will be Katie Couric, anchor and managing editor of the "CBS Evening News"; Tom Brokaw; Bob Schieffer; Sean McManus, president of CBS News and Sports; Leslie Moonves, CBS Corp.'s president and chief executive officer; and others. Performances are scheduled by Jimmy Buffett and Mickey Hart, who was a Grateful Dead drummer.

WEST WING MUST-READ — L.A. Times, “ Despite fumbles, Biden's a player: Cementing his value to Obama, the vice president has been tapped to take on key issues. Next up: healthcare,” by Peter Nicholas and Paul Richter: “[I]n defiance of the normal rules of American politics, Vice President Joe Biden appears to be solidifying his relationship with his boss and accumulating more assignments central to the administration's agenda. Having lined up support in the Senate to assure passage of the $787-billion economic stimulus plan, Biden was recently tapped by President Obama to play a bigger role in the healthcare debate that is now dominating the congressional agenda.”

TOP TALKER — JON STEWART opened “The Daily Show” by playing a clip of the president saying, “the public option, whether we have it or we don’t have it.” Stewart feigns surprise: “Wait a second! What did you just say?! … No public option? … Did you just drop public option? … Mr. President, I CAN’T TELL IF YOU’RE A JEDI — 10 STEPS AHEAD OF EVERYTHING — OR IF THIS WHOLE HEALTH-CARE THING IS KICKIN’ YOUR ASS JUST A LITTLE BIT. Why is this so hard? Why can’t you guys just stay on message? Remember the Bush team? Little bit of discipline, little bit of repetition. They sold us a WAR nobody wanted and nobody needed. [Clips of President Bush, Secretary Powell, Condi Rice, Secretary Rumsfeld, Vice President Cheney, Mrs. Bush all echoing each others’ language in the run-up to Iraq.] Salesmanship! THOSE GUYS could sell ice cubes to Eskimos. The Democrats, I don’t even think could sell Eskimos BEEP they need — insulation, heating apparatus. … Yes, we can! [pause] Unless you don’t think we should!” VIDEO

TOP STORY — “ Liberals revolt over public option,” by POLITICO’s Jonathan Martin and Carrie Budoff Brown: “A group of left-leaning House Democrats tells POLITICO that a bill without a public option simply won’t win enough votes in their caucus — a sentiment that raises fresh questions about the prospects to enact sweeping health care reform this year. ‘A bill without a public option won’t pass the House,’ said Rep. Anthony Weiner (D-N.Y.), a member of Energy & Commerce Health subcommittee. ‘Not only are they weakening their proposal, but they are also weakening their hand. This is legislative subtraction by subtraction.’ … [T]he leaders of the Congressional Progressive Caucus and Congressional Black Caucus sent the same message to Health and Human Services Secretary Kathleen Sebelius … ‘To take the public option off the table would be a grave error; passage in the House of Representatives depends upon inclusion of it,’ wrote Reps. Raul Grijalva (D-Ariz.), Lynn Woolsey (D-Calif.) and Barbara Lee (D-Calif.) in a letter to Sebelius Monday. …

“Even if top aides didn’t intend to do it, the White House got a glimpse of what may well happen — a Democratic civil war — if President Barack Obama does indeed give up on the public option. The liberal uprising comes after weeks in which Democratic congressional leaders have focused their energy on winning over moderates — with House leaders trying to woo Blue Dog fiscally conservative Democrats, and Senate negotiators concentrating on a handful of Republicans. … The White House is clearly betting that liberals simply won’t walk away from a health-reform bill that achieves most of what Democrats want, such as expanded coverage, affordability and limits on some insurance company practices, including dropping people when they get sick. … According to a whip count by Open Left, a liberal blog, 43 senators support the public option. ‘So the question is, how do you build a majority on the public option?’ said Richard Kirsch [of Health Care for America Now, funded by liberal and labor groups]. ‘You can’t have a situation where a minority of folks are dictating the whole package.’”

ROBERT GIBBS, gaggling on Air Force One yesterday: “I got to tell you, this is one of the more curious things I've ever seen in my life. I was on a Sunday show [‘Face the Nation’], I said the same thing about a public option that I've said for I don't know how many weeks. The [HHS] Secretary reiterated what the President said the day before, and you'd think there was some new policy. … His preference is a public option. If there are other ideas, he's happy to look at them. … I challenge you guys all to go back and see what we've said about this over the course of many, many, many, many months, and you'll find a boring consistency to our rhetoric. … [N]othing has changed. … Nothing has changed.”

LIVE ONLINE — ROBERT REICH, secretary of Labor under former President Bill Clinton, posted yesterday in the POLITICO ARENA: “If you are receiving piles of emails from the Obama email system asking you to click in favor of health care, do not do so unless or until you know it has a clear public option. Do not send money unless or until the White House makes clear its support for a public option. This isn't just Obama's test. It's our test.” REICH takes your questions at 1 p.m. ET today.

**A message from AFSCME’s Highway 2 Healthcare Tour: AFSCME Rocks and Rolls for Reform during August Recess. For a tour schedule, go to www.Highway2Healthcare.com. **

— NYT's BOB HERBERT, “ This Is Reform? Why the insurers and the drug industry are smiling”: “[I]f we manage to get health care ‘reform’ this time around it will be the kind of reform that benefits the very people who have given us a failed system, and thus made reform so necessary. Forget about a crackdown on price-gouging drug companies and predatory insurance firms. That’s not happening. With the public pretty well confused about what is going on, we’re headed — at best — toward changes that will result in a lot more people getting covered, but that will not control exploding health care costs and will leave industry leaders feeling like they’ve hit the jackpot. … Insurance companies are delighted with the way ‘reform’ is unfolding. Think of it: The government is planning to require most uninsured Americans to buy health coverage. Millions of young and healthy individuals will be herded into the industry’s welcoming arms. This is the population the insurers drool over. This additional business — a gold mine — will more than offset the cost of important new regulations … If the oldest and sickest are on Medicare, and the poorest are on Medicaid, and the young and the healthy are required to purchase private insurance without the option of a competing government-run plan — well, that’s reform the insurance companies can believe in.

“And then there are the drug companies. A couple of months ago the Obama administration made a secret and extremely troubling deal with the drug industry’s lobbying arm, the Pharmaceutical Research and Manufacturers of America. The lobby agreed to contribute $80 billion in savings over 10 years and to sponsor a multimillion-dollar ad campaign in support of health care reform. The White House, for its part, agreed not to seek additional savings from the drug companies over those 10 years. This resulted in big grins and high fives at the drug lobby. The White House was rolled. The deal meant that the government’s ability to use its enormous purchasing power to negotiate lower drug prices was off the table. … [T]he public — struggling with the worst economic downturn since the 1930s — is looking on with great anxiety and confusion. If the drug companies and the insurance industry are smiling, it can only mean that the public interest is being left behind.”

— WashPost's EUGENE ROBINSON: " Where's Mr. Transformer?": "Giving up the public option would send many of Obama's progressive supporters into apoplexy, yet the administration has sent clear signals that this is the path of less resistance it's prepared to take. ... Clearly, the White House feels itself on the defensive. But why? Consider the political landscape. Democrats control the White House and both houses of Congress. No matter how disciplined Republicans are in opposing any reforms — even if Republican objections are accommodated — they don't have the votes to kill a final bill. If conservative 'Blue Dog' Democrats are successful in nixing a public health insurance option and watering down other reforms, progressive voters have a right to ask why they went to such trouble to elect Democratic majorities and a Democratic president. But the Senate can still resort to a parliamentary maneuver that would require only 51 votes ... [F]ailure to get any health reform measure passed and signed would be a severe blow to Obama — and a bad omen for the rest of his ambitious agenda to revolutionize U.S. policy on energy and education. It would be understandable if the White House decided that the important thing, at this point, was to get a 'win' at all costs. ... What the president hasn't done is the obvious: Tell Congress and the American public, clearly and forcefully, what has to be done and why. Take control of the debate. Consult less and insist more. Remind the Blue Dogs who's president and who's not. Giving up on the public option might be expedient. But we didn't elect Obama to be an expedient president. We elected him to be a great one."

— L.A. Times lead story, “Obama backs off to move ahead: His concession on a public insurance option boosts the chances for his overall health-care effort” (SAME STORY TEASED ON CHICAGO TRIBUNE P.1 ), by Peter Nicholas and Janet Hook: “By dropping his insistence on a public insurance option, President Obama angered some of his most loyal supporters but sharply improved the odds of passing a far-reaching health-care overhaul. Moderate Democratic lawmakers are now more likely to back other parts of the evolving legislation, such as prohibiting insurers from denying coverage because of preexisting conditions or cutting off benefits to ill policy-holders, as well as making it easier for small businesses to cover workers. At the same time, the White House appeared to be making a calculation that liberals would go along with the legislation even if it lacked a provision they deemed indispensable. …

“Families USA Executive Director Ron Pollack, a leading consumer advocate who has been pushing a healthcare overhaul for decades, said his group had been distributing a memo touting the ‘ 10 Reasons to Support the Health Care Reform Bills.’ A government plan was only one of them. ‘The health reform bills have many critical factors designed to make healthcare more accessible and more affordable,’ Pollack said in an interview. He and others noted that the bills working their way through the House and Senate included provisions that would transform the way Americans get health insurance — even without a government plan. ‘The public plan is not the essential element of reform,’ said Jim Kessler, vice president for policy at Third Way, a centrist Democratic think tank in Washington.”

— RACHEL MADDOW, opening her MSNBC show: “Four of the eight most traded stocks in America today were giants in the health business. Pfizer, Wyeth, Aetna, United Health — and all four had great days today even as the rest of the market slumped. Why was today such a good day to be a stockholder in, say, United Health? Well, here’s a hint. [Plays clips of Sebelius, Gibbs, Obama and Conrad walking away from public option.] You know, when you have a weekend like that, it’s no real surprise when Monday turns out to be a great day for health insurance stock prices. … We got here through a collapse of political ambition, and the resultant downgrading of expectations for this once-in-a-lifetime, stars-aligned political shot at fixing this system … We know that the president both when he was a candidate and well into the current debate as president said that a public option was a must. [Clip of Obama saying: ‘That’s why any plan I sign must include an insurance exchange, including a public option.’] ‘Must,’ he said — ‘must.’ He has changed his mind on that now apparently. … [W]hy is the public option dying now? It’s dying because of a collapse of political ambition. The Democrats are too scared of their own shadow to use the majority the American people elected them to in November to actually pass something they said they favored.”

— ED SCHULTZ, front-row regular at White House press conferences, opening his MSNBC show: “[T]he White House, I think, is dazed and confused … They don’t know what page they’re on. I mean, they don’t have a playbook. You can’t go over to the White House and say, can we have your plan for health care, and boom, there’s a 200-pager right there. They don’t have that. Now, what they have is a bunch of bullet points and a bunch of ideas, but the bottom line here is that the president I think needs to be more direct and start doing some arm-twisting with some folks that aren’t listening to him.”

— KEITH OLBERMANN: “The White House is claiming almost simultaneously that the public option is not essential and that nothing has changed. These would seem to be mutually exclusive.”

NEWSWEEK’S HOWARD FINEMAN, to Keith: “[I]f it is a bargaining chip, I think he’s playing it way too early. … It’s not helping his cause or he’s looking weak as he negotiates with people who don’t really want to negotiate with him.”

ALSO DRIVING THE CONVERSATION:

— BOEHNER URGES PhRMA TO RETHINK DEAL — POLITICO’s Patrick O’Connor: “House Republican Leader John Boehner delivered his former GOP colleague — and now PhRMA CEO — Billy Tauzin a big ‘I-told-ya-so.’ In a scathing, borderline condescending, ‘dear colleague,’ Boehner urged Tauzin to unwind PhRMA's deal with President Barack Obama and Senate Finance Committee Chairman Max Baucus (D-Mont.) to support health care legislation in exchange for profit protection under rules established in the controversial 2003 prescription-drug bill. ‘Appeasement rarely works in conflict resolution,’ Boehner said in the letter. ‘This is as true in the arena of policymaking as it is in schoolyards across America. When a bully asks for your lunch money, you may have no choice but to fork it over. But cutting a deal with the bully is a different story, particularly if the 'deal' means helping him steal others' money as the price of protecting your own.’ … The letter is signed simply, ‘John.’” STORY, WITH FULL TEXT OF LETTER

— GRASSLEY ADMITS HE HAS TO PLAY POLITICS — NBC’s “First Read”: “In [a telephone] interview … on MSNBC's ‘Morning Meeting with Dylan Ratigan,’ Senate Finance Committee ranking member Chuck Grassley (R) said he'd vote against any health-care reform bill coming out of the committee unless it has wide support from Republicans — even if the legislation contains EVERYTHING Grassley wants. ‘I am negotiating for Republicans,’ he said. ‘If I can't negotiate something that gets more than four Republicans, I'm not a good negotiator.’ When NBC's Chuck Todd, in a follow-up question on the show, asked the Iowa Republican if he'd vote against what Grassley might consider to be a ‘good deal’ — i.e., gets everything he asks for from Senate Finance Chairman Max Baucus (D) — Grassley replied, ‘It isn't a good deal if I can't sell my product to more Republicans.’ In short, Grassley says he's willing to walk away from legislation in which he gets everything he wants.”

— WORTH FOLLOWING UP — FEC GRIDLOCK — AP’s “Inside Washington: An occasional look at how Washington works — or doesn't,” by Jim Drinkard: “The agency that enforces the laws governing political money is gridlocked by ideological differences. Courts have eaten away parts of the law, ruling them at odds with constitutional guarantees of free speech. And President Barack Obama, who made campaign promises to step up the Federal Election Commission's enforcement, is in no position to deliver on that pledge amid higher-priority policy battles over the economy, health care and the environment. Campaign finance rules are teetering between a major makeover and irrelevance. … [T]he ideological fight is over whether government can even try to prevent corporations and unions from spending millions on politics. … [I]t means election lawyers are hard pressed to advise their corporate, union and political clients on what the rules will be for next year's midterm congressional elections. … [T]hree Republicans [on the six-member commission] have … largely voted as a bloc, objecting to enforcement actions that in some cases were authorized by their GOP predecessors.

“The result: The most controversial issues the FEC deals with have gone unresolved, since it takes four votes for the commission to take action. …. The Supreme Court will hear arguments in September in a case testing whether independent groups can spend their own money to influence elections without coming under regulation as political committees. Court observers say chances are good that the justices will rule that they can, possibly overturning long-standing prohibitions on the use of corporate and labor union funds for politicking. … Obama last year became the first presidential candidate to forgo public financing in the general election campaign, and his fundraising prowess and victory — he spent $315 million while GOP rival John McCain had to subsist on an $84 million government grant — means future top-tier candidates will likely forgo public financing.”

— JENNY SANFORD talks to VOGUE.com for “ Notes on a Scandal”: “‘[H]iking the Appalachian Trail’ will never have the same meaning — there emerged an unlikely hero in the mess down in South Carolina. Petite, clear-eyed, strong-willed, pious without being smug, smart without being caustic, Jenny Sanford became an unlikely heroine by telling the simple truth. Her children were the most important thing in the world to her. She had kicked the lying bum out of the house when he refused to give up his mistress, but marriage is complex, life is hard, and if he wanted to try and make the marriage work, the door was open. … [W]hen her husband was on the short list to be John McCain’s running mate, Sanford silently prayed it would not come to pass. Life in the fishbowl that is the governor’s mansion has not always been easy for her or her children. ‘I am counting the days,’ she confesses, ‘until I can move back to Sullivan’s Island.’” (h/t Ben Smith)

— NEW “HOT LIST” OF YOUNG HILL STAFFERS — POLITICO’s Erika Lovley: “Congressional staffers fed up with The Hill’s annual 50 Most Beautiful People list have taken matters into their own hands. On Saturday night, a bipartisan team announced its own competing list of the hottest staffers around: the ‘Fab Fifty’s 50 Most Fabulous People.’ … [W]hat matters is not just looks: Nominees in the Fab Fifty contest were judged on popularity, humor and, naturally, all-around fabulousness. ‘We wanted to look at beauty in a different light,’ said Fab Fifty co-founder Kelechi Kalu, a Senate Democratic staffer who dreamed up the idea with friend Brandon Andrews, a Senate Republican staffer.”

BUSINESS BURST — James Rickards of the market intelligence firm Omnis talks to CNBC about the global selloff.

DESSERT — DAVID LETTERMAN’S TOP 10 TIGER WOODS EXCUSES:

10."No room left in my trophy case" 9. "Spent previous night with John Daly" 8. "Uhhh...the barometric pressure?" 7. "Wasn't feeling very Tiger-y" 6. "Would you practice if you had a hot Swedish wife?" 5. "When I learned winner doesn't get a sharp looking green jacket, I said, 'Screw it'" 4. "Maybe it was the heat, but by hole 12 my 9-iron was talking to me" 3. "Too much pre-tournament gazpacho" 2. "Instead of winning majors, focused on making every recipe in Julia Child's cookbook" 1. "What do you expect? Y.E. Yang wins everything"

**The AFSCME Highway to Health Care Reform RV will travel through key states mobilizing the public to contact their members of Congress to demand real reform — reform that guarantees quality, affordable health care for all. The Highway to Health Care Reform tour is part of the union’s unprecedented $6 million Make America Happen campaign, which includes ads, canvassing, phone calls, online activities and the deployment of dozens of campaign field organizers to key states in support of President Obama’s efforts to win real health care reform this year. Check out the tour schedule at www.Highway2Healthcare.com.**

****** A message from the Embassy of the United Arab Emirates: UAE airlines have received or have on order more than 800 Boeing aircraft. Emirates is the world's largest operator of Boeing 777s and has 40 Boeing 787-10s currently on order. Flydubai operates an all-Boeing fleet of planes and has a total of 361 Boeing 737s on order. Etihad operates 24 Boeing 777s with 25 more on order, and has an additional $8.7 billion order for Boeing 787-10s. UAE airlines now serve 11 US gateway cities from Dubai and Abu Dhabi with more than 250 weekly nonstop flights. http://politi.co/2AtLDMj ******

About The Author

Mike Allen is the chief White House correspondent for POLITICO. He comes to us from Time magazine where he was their White House correspondent. Prior to that, Allen spent six years at The Washington Post, where he covered President Bush's first term, Capitol Hill, campaign finance, and the Bush, Gore and Bradley campaigns of 2000. Before turning to national politics, he covered schools and local governments in rural counties outside Fredericksburg, Va., for The Free Lance-Star, then wrote about Doug Wilder, Oliver North, Chuck Robb and the Bobbitts for the Richmond Times-Dispatch, where he nurtured police sources on overnight ride-alongs through housing projects. Allen also covered Mayor Giuliani, the Connecticut statehouse and the wacky rich of Greenwich for The New York Times. Before moving to The Times, he did stints in the Richmond and Alexandria bureaus of The Washington Post. Allen grew up in Orange County, Calif., and has a B.A. from Washington and Lee University, where he majored in politics and journalism.